Test One Lecture Notes 20% Rule: Never have one customer responsible for more than 20% of your income, because if you lose that customer, they alone have the power to put you out of business Finance is the Future, Accounting is the past All Accounting Rules are made by the AICPA FASB- Financial Accounting Standards Board. Group of people that make accounting rules. GAAP: Generally Accepted Accounting Principles. Accrual Accounting: based on a system of matching revenue and expenses Tax Accounting: Is done in CASH. Not how much was earned, but rather how much was paid. Managerial Accounting: Budgets, Acc Receivable, Acc Payable etc. 3 types of accounting: 1. Tax Accounting 2. Managerial Accounting 3. GAAP Balance sheets have assets on one side and liabilities on the other All items on a balance sheet are recorded in historical costs All assets on a balance sheet are depreciated costs Balance sheets always show up as 0 Glass Steagle- Originally written in 1934 to rectify the cause of the depression Federal Reserve: President Ben Vernaki, appointed for a 6 year term Federal Fund Rate: The rate that banks borrow money from each other CPI: Consumer Price Index. This is how inflation is measured. Liability is always a positively real number. Assets are sometimes depreciated. Balance sheets: are the representations of a corporation at any one point in time. Income Statements: are for the period ending January 2009 (for example) (so the financial transactions over a period of time) Month, Quarter or Year to date. Income Statement for year Ending Revenue $ (Cost of Sales) ($) (Not real) Gross Profit $ (Not Real) Selling, General, Admin Exp ($) (Real) Operating Profit $ Extraordinary Items ($) or $ (Non Recurring Items) Net Income ($) or $
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